Story from issue 104 of the Manhattan East Community Association/St. Vartan Park Conservancy community newsletter
CAUTIONARY TALE EMERGES IN EAST MIDTOWN AFTER GOVERNOR CONCURS STATE ILLEGALLY LICENSED CANNABIS SHOPS NEAR SCHOOLS; STATE TELLS MORE THAN 150 BUSINESSES THEY'RE NOT IN COMPLIANCE
August 8, 2025 — On July 28, the cannabis industry was gobsmacked when New York Governor Kathy Hochul and Felicia A.B. Reid, the acting executive director of the state's cannabis regulatory agency, admitted that the state had long been issuing to retail operations cannabis licenses that were illegal because of the stores' proximity to schools.
The revelation came after an internal audit at the agency, the Office of Cannabis Management (OCM). Last week, letters were sent on Hochul and Reid letterhead to more than 150 cannabis operations, most in New York City and including more than 50 shops that had already been opened. The letter notes, "the current location of your business is in violation of the Cannabis Law based on the school(s)."
"I am keenly aware that this information will have repercussions for you, your business and your community," Reid shares in the letter. "To give you this news, and for the weight of it, I am incredibly sorry... If the Legislature does not amend the law or amends the law in a fashion that does not remedy a license location's noncompliance with the Cannabis Law, the renewal application must be denied."
Moreover, vetting continues on other possible invalid licenses. "Once the OCM does a really thorough review and really starts looking into this, the numbers are only going to go up," Matt Robinson, director of the Cannabis Retail Alliance of New York, said in a Spectrum News 1 interview that aired last night. "And that's going to be more hurt people and more impacted dispensaries."
Last week's letters were delivered to existing operations — including Etain, above at 242 East 58th Street — and preparing-to-open operations because the business' proximity to schools is not in compliance with the 2021 state cannabis law that allows certain legalization of adult-use recreational marijuana sales. The law does not allow a cannabis store to be within 500 feet of a school or 200 feet of a house of worship measuring in a straight line between the buildings' boundaries.
Last week, Crain’s New York Business called last week's cannabis bombshell, “one of the biggest cannabis regulatory mishaps in the history of the modern industry… The eye-opening news — which industry insiders say could drive many dispensaries out of business — is potentially the most expensive and broadest regulatory mistake by any state since California legalized medical marijuana in 1996.”
In Midtown East, a cautionary tale emerged, centered on Etain and, at 977 Second Avenue near 52nd Street, Urban Leaf (above at top center). Each of the businesses has confirmed that it received the state letter that its shop is not in compliance with the state's legal proximity.
More than a year and a half earlier — on November 30, 2023 — at a Manhattan Community Board 6 (CB6) Business Affairs and Licensing Committee meeting, committee member Kevin O'Keefe questioned Etain attorney Frank Tice (below in the meeting). At issue was an application Tice's multi-state cannabis company submitted for a proposed recreational cannabis operation under the Etain name at the East 58th Street address.
CB6 is Midtown East's advisory government agency. Tice was then in-house counsel for RIV Capital, then a publicly traded Luxembourg-based cannabis-focused holding company that owned Etain. After CB6 weighed in on the application to OCM, Etain would need OCM to issue a license.
O'Keefe, the president of Manhattan East Community Association and St. Vartan Park Conservancy, pointed out in the Etain meeting that a school was legally too close to the proposed cannabis address. He informed Tice that RIV Capital was misrepresenting New York State's 2021 cannabis law with a claim, debunked in last week's state notice, that the proposed store could legally be within 500 feet of a school or 200 feet of a house of worship if those entities were not "on the same street."
Tice said OCM had provided "comfort" that the location was worthy because of the now-discredited assertion that the shop and school needed to be "on the same street, so not as-the-crow-flies proximity."
"That's not from the 2021 law," O'Keefe responded. "I feel like Cassandra, the Greek goddess here. She was the one who was prophetic about the future but people didn't believe her because Apollo put a curse on her."
The committee then voted against the Etain application. However, following urging by the then-chair of CB6 for the committee members to go along with the OCM and RIV Capital interpretation, an unorthodox second committee vote passed by a single vote, and later passed the full board after the chair made the since-debunked claim that "the law is 500 feet and on the same block."
O'Keefe was not in favor on any of the three votes. The Etain store was opened at 58th Street address last fall.
O'Keefe — below, less than two weeks after the 2023 committee meeting speaking out against illegal shops on the Lower East Side alongside host and State Assembly Member Harvey Epstein (on right) — had become a leading community advocate for legal shops. For months, he had been warning that the state's 2021 law would eventually negate any licenses that were not in line with legally allowable school proximity and other legal requirements, hurting those businesses.
On September 28, 2023, Joseph Abromov — a former dealer when marijuana sales were illegal, the type of applicant OCM said it was looking to help — joined the CB6 business committee's monthly meeting. He was seeking support to operate a cannabis shop at the 277 Second Avenue address. He would call the small business Urban Leaf.
O'Keefe informed Abromov that the address was legally saddled and expressed displeasure about OCM hurting the very businesses they were purporting to help.
Said O'Keefe, "As I stated previously in CB6 public discussion, I am in favor of legal and safe cannabis, and that is as put forward in the 2021 Marijuana Regulation and Taxation Act and in other constitutional rules and regulations....We need to mitigate risk for business owners and we're here to support those business owners... I personally support small business owners and feel for you... You have to speak truth to power sometimes, and I'm speaking truth to the OCM."
OCM granted Urban Leaf a license and the store was opened in April 2024 after the business had signed a ten-year lease on the retail space. Many New York cannabis shops' leases are for terms well beyond OCM's two-year licenses, with the expectation that the license would continue to be renewed. But if a business was found to be in non-compliance, what recourse will it have if the business collapsed when forced to make lease payments?
That was one of the questions O'Keefe posed to Chris Alexander in January 2024 when the two met in Kips Bay three months before Urban Leaf's opening. Alexander was the OCM's executive director from the agency's launch until his resignation from the agency in May 2024.
Alexander listened to O'Keefe's concerns about potential financial risk to multiple cannabis licensees because of the legal proximity problem. OCM did not stop its proximity misguidance during Alexander's tenure. The governor replaced him with Reid (above) as acting executive director.
Last week, the OCM audit concurred with O'Keefe's proximity analysis. In a live Spectrum News New York 1 interview on July 30, Hochul (below with O'Keefe in March), said that previous OCM leadership "had applied the law incorrectly. But I don't think it should be borne on the backs of these people — so many of them, their life savings, they're going to these businesses. They've worked hard to go through the lengthy process to be licensed and then to have a location. So I have said we are going to stand up for them."
Last night, Spectrum News 1 state reporter Kate Lisa dropped a story about last week's proximity news, "an error that sent retailers into chaos... At least six people familiar with conversations between Hochul’s office and OCM say the governor directed top staff in April to research and work on issues with the proximity rule."
Lisa's piece includes an interview with Alexander. Said the former OCM chief, "This policy, if effectuated, will collapse New York's cannabis market — period."
Last Thursday in a CB6 Business Affairs and Licensing Committee meeting, O'Keefe presented a 90-second version of the Midtown East cautionary tale. He concluded, "Let's not rubber stamp votes, especially when it involves new state regulatory agencies, especially those that were in charge of — as the governor has said about the cannabis rollout — 'a disaster.'"
In the meeting, New York State Assembly Member Alex Bores told the community members in attendance, "We are going to have really difficult conversations going forward for entrepreneurs that have opened locations in violation of the law but who were told by the government that it was a valid place. That is not a situation that is easy to rectify. And a number of these people have gone into extreme debt in order to open their stores."
Bores continued, "OCM in the notice about this change actually included the phone number of the suicide hotline — that is the level that they are expecting needs to be addressed here. So this will be a really serious challenge for the existing entrepreneurs.
"I want to find a way to ensure that they are made whole for mistakes that weren't theirs, that were government mistakes, but still living up the spirIt of the law and letter of the law, and not having communities suffer and not having these locations very near schools."
Two days ago, Reid sent a letter to those who have received her July 28 notice. She wrote,“I want to reassure each of you that Governor Hochul understands the injustice to impacted businesses in how previous OCM leadership set in place a practice that did not comply with Cannabis Law. The governor is committed to fighting for impacted cannabis businesses."
